If you're an employer who offers health care benefits to your employees, you must comply with coverage disclosure requirements implemented by health care reform.

For health coverage open enrollment periods beginning on September 23, 2012 and later, the Patient Protection and Affordable Care Act (ACA) requires group health plans and health insurers to provide a Summary of Benefits and Coverage (SBC). As the name implies, the purpose of an SBC is to summarize a health plan’s benefits and coverage in plain language and in a standardized format. Your responsibility, as well as the insurer’s, is to distribute a properly prepared SBC to your employees to help them understand, compare and evaluate their health insurance options.

Work Smart

You can satisfy the requirement of not only preparing but distributing the SBC through your insurer. One SBC meets the requirement for both the plan and the insurer. Arrange with your insurer to prepare the SBC and if possible, execute the distribution as well. While only one SBC is required, each party is individually responsible for the disclosure. Therefore, you will want to coordinate the SBC preparation and distribution with your insurer to make sure that this obligation is fulfilled using the proper channels and within the timing requirements.

If your plan is self-insured, generally, you are responsible for preparing the SBC. Even if you outsource your health benefits administration, you are ultimately the responsible party. Therefore, check with your administrator to be certain that the duties imposed by the ACA are being met in a timely fashion.

Overview of the Content and Format Requirements for the Summary of Benefits and Coverage

Rules issued by the Labor, Health and Human Services and Treasury Departments spell out the health care plan information that must be included in the SBC. Using a four-page format with no smaller than 12-point font, the SBC should contain a description of the coverage, including limits and exceptions and the following cost-sharing requirements:

deductibles

coinsurance

copayments

Update: SBCs provided for coverage for 2014 must include statements indicating whether or not the plan or insurance provides minimum essential coverage as required by the ACA and whether or not it meets minimum value requirements, so that the plan or insurance share of total allowed costs of benefits is at least 60 percent of those costs.

SBCs must also include coverage examples illustrating the differences between health plans. The current rules require the coverage examples to contain benefit information for two situations:

Future coverage examples will include additional scenarios based on consumer feedback.

Detailed compliance guidance, including SBC templates and completed sample SBCs is available on the Department of Labor’s website.

Uniform glossary requirement. A uniform glossary, a list of definitions explaining commonly used health insurance coverage terms developed by the Departments of Health and Human Services, Labor and the Treasury, must be referenced as available in the SBC. The following language is included in the SBC template:

”If you aren’t clear about any of the underlined terms used in this form, see the Glossary. You can view the Glossary at www.[insert] or call 1-800-[insert] to request a copy.”

The uniform glossary may be posted on the plan website or a Department’s glossary may be referenced. A glossary can be accessed on the Department of Labor’s website.

When and How to Distribute the Summary of Benefits and Coverage

Employers are required to provide an SBC for the health care benefits you offer employees during open enrollment period. Your employees must have the required documents by the first day of open enrollment.

In addition to the open enrollment period, you’ll have to provide the appropriate documents to eligible new hires, during special enrollments and for certain changes in coverage.

If an employee requests plan information, you have seven business days from the request to provide the SBC and the uniform glossary. Note that if the documents are sent within seven business days of the request, even if they are not received until after the seven days have passed, you have properly complied with the time requirement.

How do you properly distribute the SBC? Both paper and electronic methods are generally acceptable, with some limitations.

Tip

You are not required to provide the SBC separately—this means that you can include the SBC with other documents for your health benefits that you distribute as long as the SBC content is together and not buried within the materials. The SBC must be in a prominent, up-front position.

Paper distribution. You may provide employees with the SBC documents by handing them out or through the mail.

Electronic distribution. An SBC may be provided electronically to employees covered under a plan if they have the ability to access electronic documents as part of the duties they perform. You should provide employees with paper or electronic notice that the SBC is available online and how to access it, and let them know that a free paper copy will be provided, upon request.

Employees may also opt to receive electronic delivery.

Generally, the SBC can be provided electronically to employees who are not already enrolled if the following conditions are met:

the electronic format is a readily accessible one such as a PDF or Word document

a paper SBC is provided upon request, free-of-charge

if the SBC is posted on the Internet, the plan or issuer must give employees notice of the posting and the Internet address (email may be used to advise employees)

In addition, an SBC may be provided electronically to employees if they enroll in or renew their plan coverage online. Again, you must specify that a paper SBC is available upon request.

Providing an SBC in a language other than English. You may be required to provide the SBC in a language other than English if 10 percent or more of your county’s population is literate only in a different common language as determined by the U.S. Census Bureau’s American Community Survey. Currently, 177 U.S. counties (excluding Puerto Rico) meet this threshold, with the majority being literate only in Spanish.

Contact your insurer or administrator if you think that this requirement applies to your location.

You Can Incur Penalties for Failing to Provide the Required Documents

What happens if you don’t provide eligible employees with a properly completed SBC in a timely manner? Group health plans “willfully” failing to provide the required information to employees can be fined up to $1,000 for each employee. However, the penalties will not be imposed on plans that are working diligently and in good faith to comply with the format and delivery requirements.

Warning

Don’t be lulled into complacency, thinking that you can be lax in complying with the new disclosure requirements. The fines can be steep, so you should at least make a good faith effort to comply with the rules.

Be aware that this is just an overview. More information, including sample completed SBCs in English and other languages, can be found on the government’s Center for Consumer Information and Insurance Oversight website.

Contact your insurer, your benefits administrator, and/or consult with an employee benefits specialist today so that you don’t run afoul of what is now law.